F.B.I. Botched Evidence Collection in Fraud Case, Judge Rules

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Benjamin Wey, right, a New York financier who helped Chinese businesses acquire shell companies, is scheduled to stand trial in October on securities fraud and money laundering charges.CreditFrank Franklin II/Associated Press

Federal prosecutors contend that Benjamin Wey, a New York financier with an art for self-promotion, made tens of millions of dollars through a long-running stock manipulation scheme.

But the government’s case against Mr. Wey may be falling apart after a federal judge ruled this week that, in early 2012, law enforcement botched a daylong search of his office in Lower Manhattan and his nearby apartment for evidence of wrongdoing.

Judge Alison Nathan of Federal District Court in Manhattan said in a 92-page ruling that none of the documents, email messages, business receipts, computer hard drives and other records gathered in those searches could be used against Mr. Wey at his trial because the search warrants were overly broad and did not specify the crimes he was suspected of committing.

The judge also said the 17 agents with the Federal Bureau of Investigation who conducted the searches were largely indiscriminate in seizing property — taking such things as drug prescriptions, X-rays of Wey family members and his children’s school records and test scores.

She also noted that the raids took place more than three years before Mr. Wey was indicted in September 2015 and that authorities took a long time returning personal materials to Mr. Wey and his family.

The ruling embarrassed federal prosecutors and was made just months before Mr. Wey’s trial date in October on securities fraud and money laundering charges. It is not clear what other evidence prosecutors have against Mr. Wey. As the founder of New York Global Group, Mr. Wey has made a fortune helping Chinese companies acquire what are known as shell companies — often the remnants of publicly traded companies — in deals called reverse mergers.

“We honestly don’t know what the government’s evidence is at this point,” said David Siegal, Mr. Wey’s lawyer and a partner with Haynes and Boone.

A spokesman for Joon Kim, the acting United States attorney in Manhattan, declined to comment. The searches occurred when Preet Bharara, Mr. Kim’s predecessor, ran the office.

The sweeping suppression order by Judge Nathan, however, sheds light on the sometimes aggressive tactics law enforcement officials use in raids and searches — especially in securities fraud cases. Some of those tactics already were under attack in a pending lawsuit filed two years ago by a former hedge fund manager.

In that lawsuit, David Ganek, the former fund manager, claims that F.B.I. agents and federal prosecutors violated his civil rights by conducting an improper search of his firm’s Manhattan offices during a broad crackdown on insider trading in the hedge fund industry. Mr. Ganek has said his inability to refute a misleading statement by law enforcement that he had some awareness of insider trading at the firm, Level Global Investors, ultimately forced him to close the hedge fund in 2011.

Mr. Ganek’s lawsuit contends that an affidavit in support of the search warrant had “falsely represented” that Mr. Ganek was involved in insider trading and that it was enough for the judge to approve the warrant. The lawsuit noted that at a subsequent trial, a former Level Global analyst never implicated Mr. Ganek in insider trading and the government never charged him with wrongdoing.

Mr. Ganek filed his lawsuit shortly after the search warrant was made public after The New York Times had filed a motion to unseal it.

Last year, a federal judge rejected a motion by federal prosecutors in Manhattan to dismiss the case. Federal prosecutors are appealing the ruling by Judge William H. Pauley III of the Federal District Court in Manhattan. Oral arguments on the appeal took place in March.

Mr. Ganek’s legal challenge has attracted some support from the criminal defense bar.

The National Association of Criminal Defense Lawyers filed a friend of the court brief with the United States Court of Appeals for the Second Circuit in November in support of Judge Pauley’s ruling. In the brief, the lawyers’ group said “misconduct by prosecutors and law enforcement officers is far too common.”

Joshua L. Dratel, one of the lawyers on the association’s brief, said the issues raised in Mr. Wey’s case often do not come to light because more than 90 percent of cases brought by federal prosecutors end with guilty pleas.

To get a judge to approve a search warrant, law enforcement must show “probable cause” that a crime has been committed. But the burden of meeting that standard is low, and judges are often persuaded by long affidavits in support of a warrant.

In the case of Mr. Wey, the affidavit supporting the search warrant was about 100 pages.

But Mr. Dratel said searches too often can become an excuse for law enforcement to get “unfettered” access to an individual’s documents in the hopes of building a case.

“It is a tip-off when it takes so long to indict after a search warrant is issued,” said Mr. Dratel, who represented Ross Ulbricht, the man convicted of being the mastermind of Silk Road, a notorious drug emporium on what is known as the dark web.

Mr. Siegal, likened the government’s search of Mr. Wey’s home and the offices of his business to a “fishing expedition.”

“This was a fishing expedition to satisfy their curiosity about someone’s business that they didn’t understand,” Mr. Siegal said. “This is what the Constitution prohibits. You need probable cause.”

In her decision, Judge Nathan said neither the lead F.B.I. agent, Matthew Komar, nor the lead prosecutor, David Massey, had instructed the agents carrying out the raids “as to any sorts of items that should not be seized during the forthcoming search.” She said there was no indication any of the agents other than Mr. Komar had read the lengthy affidavit.

Judge Nathan also expressed concern that it took more than a year for law enforcement to complete a “taint review” to determine which electronic communications and documents on Mr. Wey’s computers and cellphones were subject to “potential privilege” claims by Mr. Wey and could not be used as evidence against him.

Mr. Komar and Mr. Massey, who is now in private practice, testified at a two-day suppression hearing in January.

Mr. Wey’s trial had promised to be one of the more splashy securities fraud cases of the year given his penchant for making tabloid headlines.

In 2015, a few months before a federal jury indicted him, a Swedish model who had worked for Mr. Wey was awarded $18 million in a sexual harassment lawsuit against him. The judge reduced it to $5.6 million.

On Thursday, Mr. Wey posted a message on his Twitter account calling his legal victory “a win for American justice.” The post included an image of the United States flag with the message “Proud to be American” emblazoned on it.

A version of this article appears in print on , on Page B2 of the New York edition with the headline: Judge Bars Evidence Collected in F.B.I. Searches From Securities Fraud Case. Order Reprints | Today’s Paper | Subscribe